Mexico Financing Options for Real Estate Purchases

Over the years, we have had many buyers come to Mexico with the assumption that buying property here can be done with as little as a 10 percent down payment and financing the balance. When they realize this is not the case, we often get asked about financing options for buying property in Mexico.

Although bank mortgages are available (in pesos) for Mexican nationals, they are not available for foreigners.

In the past, banks like BBVA or Scotia Bank offered financing options with 30 percent down payment and interest rates of 7.5 to10 percent and qualifications via fico score and income verification. This program, however, stopped about six years ago when the world economy went through financial trouble.

Today, cross-border financing for foreigners is offered through companies such as Conficasa, Mortages in Mexico and MexLend, for example, or even by builders offering short-term developer financing. Another option to financing your Mexico property might be to obtain short-term owner direct financing. The latter options are 3-5 year terms with interest rates between 5-8 percent.

In general, our recommendation for financing is to secure the financing you need in your home country through refinance options at your bank or by using equity line credits or secondary mortgages of your home.

In both cases, most developers or owners will not transfer title to the buyer until the property is paid in full. This is how the seller protects themselves from eliminating a long foreclosure process in the event the buyer defaults. One of the main problems with foreign banks offering financing is that the foreclosure process in Mexico is very long and complicated.

Financing offered by developers or owners in general require a larger down payment. Financing of the balance is done with either straight mortgage payments or balloon mortgage payments. Developments like Quadra Alea currently have some developer financing options available.

Another option is buying pre-construction projects.

In this case developers will ask for a 10 or 20 percent down payment and then require you to make payments on a monthly basis or on fixed dates. Of course there are risks associated with these type of options, so it is important that you check out the developers by reviewing their delivery history on other projects in the area.

Check if there have been any issues with the delivery of the units or obtaining titles to the properties. We always recommend structuring such transactions based on construction stages of the developments. Pay your down payment and then make the next payment when foundation work is done, then for example, make another payment when the rough construction is complete, then another when the condo is finished and hold back 20 percent until title delivery.

This will limit your risk of buying into a project and spending 100 percent of your money on an unfinished product. We also like to put stiff penalties in the agreement for delivery delays. Over the years, we have seen developers like A-Nah in central Playa del Carmen deliver the units almost a year late, leaving many homeowners with issues obtaining their titles.

It is very important to do research on who the developers are, what buildings have been completed and how the delivery of the units was handled.

It is also very important to work though the entire process with a realtor. Do you know that the state of Quintana Roo now requires all real estate realtors to be licensed and follow strict guidelines by SEDUVI (Government Agency in charge of the Licensing)? Make sure the realtor you choose is properly licensed and experienced and able to handle your real estate needs.

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